Federal Help Available for Residents With Crumbling Concrete Foundations

Major developments on the NBC Connecticut Troubleshooters investigation into crumbling foundations. We have been telling you about the plight of homeowners for more than two years. And now, more help is on the way.

Last month state leaders came through with $100 million of bond money over five years. Now the U.S. Congressmen representing the areas with the problem have another solution, tax deductions for repairs done on homes with crumbling concrete basements.

Congressmen John Larson and Joe Courtney say after 19 months of negotiating, they have secured federal tax relief from the IRS. People facing expenses to fix this, that can approach and even exceed $200,000 can now deduct the cost of the repairs that are not reimbursed. Most insurers do not cover this problem that affects people like Sheila Cyr of Tolland. “This is great. I had tears in my eyes just listening to this whole thing. Just, so appreciative and thankful to everybody."

The crumbling basements have been caused by concrete poured from 1983 through about 2013 in north central and eastern Connecticut that have the naturally occurring mineral pyrrhotite in it. When exposed to air or moisture, it can cause cracking

Under current federal tax law, taxpayers may deduct a casualty loss from their income if they have suffered a sudden loss due to fire, flood, theft, or other sudden and unusual causes. While pyrrhotite-related damage develops over time, Courtney and Larson have been seeking IRS guidance to allow a casualty deduction related to this longer-term damage, citing the precedent of IRS assistance to homeowners affected by corrosive Chinese drywall in 2010.

The new guidance, released November 22nd by the Treasury Department, approves their request for federal tax relief. Specifically, the guidance allows for the treatment of crumbling foundation-related repair costs as a “casualty loss” deduction from a taxpayer's taxable income. The change is effective immediately.

Congressman Courtney says at this point it is not known if the tax deduction applies for businesses or condos with this issue, but it does appear to allow people to make deductions on repairs in the past, “Let's say they fixed their house in 2015, okay, and didn't claim it, you know what I saw there I would interpret that that they would be able to file an amended return."

How far back you can go with the deduction remains the question. The biggest advice Congressmen Courtney and Larson shared was, for people with this issue looking for a tax deduction, they should definitely consult with a tax preparer.

Congressman Larson adds “The individuals and families in Connecticut with crumbling foundations have been experiencing an ongoing nightmare. While there is no one silver bullet solution to make up for the loss experienced by these homeowners, today’s announcement by the U.S. Department of Treasury will provide at least some degree of relief for many of them. It is the first time that the federal government has acknowledged the unique harm Connecticut residents have suffered through no fault of their own. I’d like to thank the IRS, the Department of Treasury, the National Taxpayer Advocate, and especially all of the homeowners who have reached out to my office to share their stories and allowed me to tour their homes.”

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